Rarely Invoked "Auto Business" Exclusion Upheld as Basis for Denial of UIM Benefits

In its recent October 7, 2011 opinion in the case of Liberty Mut. Ins. Co. v. Sweeney, Civl Action No. 06-2227 (E.D.Pa. Oct. 7, 2011, Tucker, J.), the court relied upon the rarely invoked "auto business" exclusion to rule in favor of the carrier's request for a declaratory judgment regarding the carrier's denial of the injured party's claim for UIM benefits.

According to the opinion, on the date of the accident, the injured party owned an auto mechanic business that specialized in transmission repairs.  He had a relationship with AAA Automotive Center, an auto repair and car rental service center.  As part of the relationship, AAA would provide rental cars to customers of the injured party at a discount while the injured party worked on his customer's cars.  In exchange, AAA would send any of its rental cars needing transmission work to the injured party's establishment for repairs.

On the date of the accident, the injured party picked up a vehicle owned by AAA to deliver it to his customer the next morning.  On the evening that the injured party picked up the business vehicle, he stopped by a store on a personal errand to pick up some groceries for himself.  On his way home from the store, the injured party was involved in the subject auto accident.

The vehicle owned by AAA was not covered under the injured party's own automobile insurance policy.  However, the injured party's policy did provide UIM coverage for certain "non-owned" vehicles.  The injured party therefore made a claim for UIM benefits under his own policy.

The carrier denied coverage and filed a declaratory judgment action raising various exclusions.  The focus of this opinion in the Eastern District Federal Court was on the rarely invoked "auto business" exclusion.

The "auto business" exclusion in the subject policy provided that the carrier would "not pay for bodily injury caused by anyone using a non-owned motor vehicle in any kind of auto business.  Examples of auto business are: selling, repairing, servicing, storing or parking vehicles."

In this case, the carrier asserted that the exclusion applied to preclude coverage because the insured was operating a "non-owned" vehicle that he had "rented" for one of his customers.  In opposition, the injured party asserted that the exclusion was inapplicable because he was running a personal errand--making a trip to get groceries--when the accident happened.

Relying on precedent handed down over 30 years ago, the court in Liberty Mut. Ins. Co. v. Sweeney upheld the exclusion as valid and granted summary judgment in favor of the carrier on the carrier's request for a declaratory judgment that it had properly denied coverage to the injured party under the circumstances presented.

It is also noted that the Court rejected the carrier's reliance upon the "regular use" exclusion contained in the policy since the injured party's one-time use of the non-owned vehicle in question was not a regular, or habitual, use of the vehicle as that term is defined in this context. 

Judge Tucker noted in footnote 3 of the Opinion that there is "no authoritative pronouncement of as to the level of activity amounting to "regular use.'"  He also noted that, since the Pennsylvania Supreme Court has not specifically addressed this issue, he would have to predict how that court would rule in this regard.  The Opinion goes on to provide a nice recitation of the current status of the law of the "regular use" exclusion and what constitutes sufficient use of a vehicle to fall within this exclusion.

Applying the ordinary meaning of the term "regular," the court noted the the type of use of a vehicle required to fall under this exclusion is a principle use of the vehicle as opposed to a casual or incidental use, or a habitual use as opposed to an occasional use.

With there being only an incidental use of the vehicle at issue in this matter, the carrier's reliance upon the regular use exclusion was rejected.  As noted above, however, the carrier did prevail based upon the application of the rarely invoked "auto business" exlcusion.

Anyone desiring a copy of the court's opinion in the case of Liberty Mut. Ins. Co. v. Sweeney may contact me at dancummins@comcast.net.

I give a tip of the hat and thanks to Pennsylvania Law Weekly reporter Ben Present for bringing this case to my attention.